When choosing is painful: anticipated regret and psychological opportunity cost

Emmanuelle Gabillon

Bordeaux Economics Working Papers from Bordeaux School of Economics (BSE)

Abstract: This paper is a contribution to regret theory, which we generalize in two ways. Since the intensity of regret depends on the information the decision-maker has about the results of the foregone strategies (feedback), we build a model of choice which accommodates any feedback structure. We also show that the reference point, which characterizes the regret utility function introduced by Quiggin (1994), does not always represent an anticipated feeling of regret. It can also correspond to another negative feeling related to the act of choosing, which we call psychological opportunity cost (POC), borne at the very moment of choosing. We find behavioral deviations from the predictions of the classical Expected Utility Theory. We obtain correlation loving, greater reluctance to take on risk, and information avoidance at decision time. Our model also offers a theoretical framework for experimental studies about inaction inertia.

Keywords: Choice; Correlation loving; Inaction inertia; Information; Regret; Risk aversion (search for similar items in EconPapers)
JEL-codes: D80 D81 D91 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:grt:bdxewp:2020-04

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